Quarterly report pursuant to Section 13 or 15(d)

Loans

v2.4.0.8
Loans
3 Months Ended
Mar. 31, 2014
Receivables [Abstract]  
Loans

Note 3 — Loans

The Board of Directors and management review and approve the Bank’s loan policy and procedures on a regular basis to reflect issues such as regulatory and organizational structure changes, strategic planning revisions, concentrations of credit, loan delinquencies and non-performing loans, problem loans, and policy adjustments.

Real estate loans are loans secured by liens or interest in real estate, to provide purchase, construction, and refinance on real estate properties. Commercial and industrial loans consist of commercial term loans, commercial lines of credit, and Small Business Administration (“SBA”) loans. Consumer loans consist of auto loans, credit cards, personal loans, and home equity lines of credit. We maintain management loan review and monitoring functions that review and monitor pass graded loans as well as problem loans to prevent further deterioration.

The majority of the Bank’s loan portfolio consists of commercial real estate and commercial and industrial loans. The Bank has been diversifying and monitoring commercial real estate loans based on property types, tightening underwriting standards, and portfolio liquidity and management, and has not exceeded certain specified limits set forth in the Bank’s loan policy. Most of the Bank’s lending activity occurs within Southern California.

Loans Receivable

Loans receivable consisted of the following as of the dates indicated:

 

     March 31,
2014
    December 31,
2013
 
     (In thousands)  

Real estate loans:

    

Commercial property (1)

    

Retail

   $ 547,472      $ 543,619   

Hotel/Motel

     331,971        322,927   

Gas station

     286,919        292,557   

Other

     751,122        731,617   

Construction

     125        —     

Residential property

     110,305        79,078   
  

 

 

   

 

 

 

Total real estate loans

     2,027,914        1,969,798   

Commercial and industrial loans:

    

Commercial term

     116,903        124,391   

Commercial lines of credit

     67,079        71,042   

International loans

     35,120        36,353   
  

 

 

   

 

 

 

Total commercial and industrial loans

     219,102        231,786   

Consumer loans

     29,356        32,505   
  

 

 

   

 

 

 

Total gross loans

     2,276,372        2,234,089   

Allowance for loans losses

     (56,593     (57,555

Deferred loan costs

     1,741        964   
  

 

 

   

 

 

 

Loans receivable, net

   $ 2,221,520      $ 2,177,498   
  

 

 

   

 

 

 

 

(1)  Includes owner-occupied property loans of $958.4 million and $957.3 million as of March 31, 2014 and December 31, 2013, respectively.

Accrued interest on loans receivable was $5.3 million and $5.4 million at March 31, 2014 and December 31, 2013, respectively. At March 31, 2014 and December 31, 2013, loans receivable totaling $1.00 billion and $568.7 million, respectively, were pledged to secure advances from the FHLB and the Federal Reserve Bank’s (“FRB”) federal discount window.

 

The following table details the information on the sales and reclassifications of loans receivable to loans held for sale by portfolio segment for the three months ended March 31, 2014 and 2013:

 

     Real Estate     Commercial
and Industrial
    Consumer      Total  
     (In thousands)  

March 31, 2014

         

Balance at beginning of period

   $ —        $ —        $ —         $ —     

Origination of loans held for sale

     6,269        85        —           6,354   

Sales of loans held for sale

     (5,874     (84     —           (5,958

Principal payoffs and amortization

     (5     (1     —           (6
  

 

 

   

 

 

   

 

 

    

 

 

 

Balance at end of period

   $ 390      $ —        $ —         $ 390   
  

 

 

   

 

 

   

 

 

    

 

 

 

March 31, 2013

         

Balance at beginning of period

   $ 7,977      $ 329      $ —         $ 8,306   

Origination of loans held for sale

     21,340        1,804        —           23,144   

Reclassification from loans receivable to loans held for sale

     3,373        —          —           3,373   

Sales of loans held for sale

     (26,907     (1,858     —           (28,765

Principal payoffs and amortization

     (14     (1     —           (15
  

 

 

   

 

 

   

 

 

    

 

 

 

Balance at end of period

   $ 5,769      $ 274      $ —         $ 6,043   
  

 

 

   

 

 

   

 

 

    

 

 

 

For the three months ended March 31, 2014, there was no reclassification of loans receivable as loans held for sale, and loans held for sale of $6.0 million were sold. For the three months ended March 31, 2013, loans receivable of $3.4 million were reclassified as loans held for sale, and loans held for sale of $28.8 million were sold.

Allowance for Loan Losses and Allowance for Off-Balance Sheet Items

Activity in the allowance for loan losses and allowance for off-balance sheet items was as follows for the periods indicated:

 

     As of and for the
Three Months Ended
 
     March 31,
2014
    December 31,
2013
    March 31,
2013
 
     (In thousands)  

Allowance for loan losses:

      

Balance at beginning of period

   $ 57,555      $ 57,639      $ 63,305   

Charge-offs

     (1,604     (738     (3,024

Recoveries on loans previously charged off

     4,251        572        714   
  

 

 

   

 

 

   

 

 

 

Net loan recoveries (charge-offs)

     2,647        (166     (2,310

(Negative provision) provision charged to operating expense

     (3,609     82        196   
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 56,593      $ 57,555      $ 61,191   
  

 

 

   

 

 

   

 

 

 

Allowance for off-balance sheet items:

      

Balance at beginning of period

   $ 1,248      $ 1,330      $ 1,824   

Provision (negative provision) charged to operating expense

     309        (82     (196
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 1,557      $ 1,248      $ 1,628   
  

 

 

   

 

 

   

 

 

 

The allowance for off-balance sheet items is maintained at a level believed to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the allowance adequacy is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities. As of March 31, 2014 and December 31, 2013, the allowance for off-balance sheet items amounted to $1.6 million and $1.2 million, respectively. Net adjustments to the allowance for off-balance sheet items are included in the provision for credit losses.

 

The following table details the information on the allowance for loan losses by portfolio segment for the three months ended March 31, 2014 and March 31, 2013:

 

     Real Estate     Commercial
and Industrial
    Consumer     Unallocated      Total  
     (In thousands)  

March 31, 2014

           

Allowance for loan losses:

           

Beginning balance

   $ 43,550      $ 11,287      $ 1,427      $ 1,291       $ 57,555   

Charge-offs

     (1,128     (422     (54     —           (1,604

Recoveries on loans previously charged off

     2,918        1,321        12        —           4,251   

(Negative provision) provision

     (1,110     (1,761     (752     14         (3,609
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance

   $ 44,230      $ 10,425      $ 633      $ 1,305       $ 56,593   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 1,029      $ 3,973      $ 117      $ —         $ 5,119   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 43,201      $ 6,452      $ 516      $ 1,305       $ 51,474   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Loans receivable:

           

Ending balance

   $ 2,027,914      $ 219,102      $ 29,356      $ —         $ 2,276,372   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 34,294      $ 14,503      $ 1,553      $ —         $ 50,350   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 1,993,620      $ 204,599      $ 27,803      $ —         $ 2,226,022   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

March 31, 2013

           

Allowance for loan losses:

           

Beginning balance

   $ 49,472      $ 10,636      $ 2,280      $ 917       $ 63,305   

Charge-offs

     (1,285     (1,575     (164     —           (3,024

Recoveries on loans previously charged off

     181        484        49        —           714   

(Negative provision) provision

     (2,040     1,519        (370     1,087         196   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance

   $ 46,328      $ 11,064      $ 1,795      $ 2,004       $ 61,191   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 764      $ 3,719      $ 401      $ —         $ 4,884   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 45,564      $ 7,345      $ 1,394      $ 2,004       $ 56,307   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Loans receivable:

           

Ending balance

   $ 1,882,445      $ 204,061      $ 35,180      $ —         $ 2,121,686   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: individually evaluated for impairment

   $ 31,317      $ 16,695      $ 1,639      $ —         $ 49,651   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Ending balance: collectively evaluated for impairment

   $ 1,851,128      $ 187,366      $ 33,541      $ —         $ 2,072,035   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Credit Quality Indicators

As part of the on-going monitoring of the credit quality of our loan portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from (0) to (8)) for each and every loan in our loan portfolio. A third party loan review is required on an annual basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows:

Pass and Pass-Watch: Pass and Pass-Watch loans, grades (0-4), are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under “Special Mention,” “Substandard” or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It incorporates all performing loans with no credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans.

Special Mention: A Special Mention credit, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified.

Substandard: A Substandard credit, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A credit graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected.

Doubtful: A Doubtful credit, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the credit, and therefore the amount or timing of a possible loss cannot be determined at the current time.

 

Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner.

As of March 31, 2014 and December 31, 2013, Pass/Pass-Watch (grade 0-4), criticized (grade 5) and classified (grade 6-7) loans, disaggregated by loan class, were as follows:

 

     Pass/
Pass-Watch

(Grade 0-4)
     Criticized
(Grade 5)
     Classified
(Grade 6-7)
     Total Loans  
     (In thousands)  

March 31, 2014

     

Real estate loans:

           

Commercial property

           

Retail

   $ 534,305       $ 7,328       $ 5,839       $ 547,472   

Hotel/Motel

     322,087         3,960         5,924         331,971   

Gas station

     279,137         115         7,667         286,919   

Other

     726,569         7,983         16,570         751,122   

Construction

     125         —           —           125   

Residential property

     108,837         —           1,468         110,305   

Commercial and industrial loans:

           

Commercial term

     102,243         2,207         12,453         116,903   

Commercial lines of credit

     66,111         —           968         67,079   

International loans

     34,540         580         —           35,120   

Consumer loans

     27,242         157         1,957         29,356   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total gross loans

   $ 2,201,196       $ 22,330       $ 52,846       $ 2,276,372   
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

           

Real estate loans:

           

Commercial property

           

Retail

   $ 531,014       $ 5,309       $ 7,296       $ 543,619   

Hotel/Motel

     308,483         1,796         12,648         322,927   

Gas station

     279,636         3,104         9,817         292,557   

Other

     690,481         8,524         32,612         731,617   

Residential property

     77,422         —           1,656         79,078   

Commercial and industrial loans:

           

Commercial term

     107,712         2,007         14,672         124,391   

Commercial lines of credit

     69,823         —           1,219         71,042   

International loans

     35,777         576         —           36,353   

Consumer loans

     30,044         163         2,298         32,505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total gross loans

   $ 2,130,392       $ 21,479       $ 82,218       $ 2,234,089   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The following is an aging analysis of past due loans, disaggregated by loan class, as of March 31, 2014 and December 31, 2013:

 

    30-59 Days Past
Due
    60-89 Days Past
Due
    90 Days or
More Past Due
    Total Past Due     Current     Total Loans     Accruing 90
Days or More
Past Due
 
    (In thousands)  

March 31, 2014

             

Real estate loans:

             

Commercial property

             

Retail

  $ 795      $ —        $ 2,583      $ 3,378      $ 544,094      $ 547,472      $ —     

Hotel/Motel

    1,326        —          1,288        2,614        329,357        331,971        —     

Gas station

    700        —          381        1,081        285,838        286,919        —     

Other

    1,873        —          1,805        3,678        747,444        751,122        —     

Construction

    —          —          —          —          125        125        —     

Residential property

    813        —          114        927        109,378        110,305        —     

Commercial and industrial loans:

             

Commercial term

    2,035        123        3,798        5,956        110,947        116,903        —     

Commercial lines of credit

    192        —          146        338        66,741        67,079        —     

International loans

    —          —          —          —          35,120        35,120        —     

Consumer loans

    540        18        227        785        28,571        29,356        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross loans

  $ 8,274      $ 141      $ 10,342      $ 18,757      $ 2,257,615      $ 2,276,372      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

             

Real estate loans:

             

Commercial property

             

Retail

  $ 202      $ 426      $ 2,196      $ 2,825      $ 540,794      $ 543,619      $ —     

Hotel/Motel

    1,087        —          1,532        2,619        320,308        322,927        —     

Gas station

    141        410        153        704        291,853        292,557        —     

Other

    423        2,036        839        3,297        728,320        731,617        —     

Residential property

    —          122        279        401        78,677        79,078        —     

Commercial and industrial loans:

             

Commercial term

    1,443        886        3,269        5,598        118,793        124,391        —     

Commercial lines of credit

    —          150        250        400        70,642        71,042        —     

International loans

    —          —          —          —          36,353        36,353        —     

Consumer loans

    311        42        77        430        32,075        32,505        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross loans

  $ 3,607      $ 4,072      $ 8,595      $ 16,274      $ 2,217,815      $ 2,234,089      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impaired Loans

Loans are considered impaired when non-accrual and principal or interest payments have been contractually past due for 90 days or more, unless the loan is both well-collateralized and in the process of collection; or they are classified as Troubled Debt Restructuring (“TDR”) loans to offer terms not typically granted by the Bank; or when current information or events make it unlikely to collect in full according to the contractual terms of the loan agreements; or there is a deterioration in the borrower’s financial condition that raises uncertainty as to timely collection of either principal or interest; or full payment of both interest and principal is in doubt according to the original contractual terms.

We evaluate loan impairment in accordance with applicable GAAP. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. If the measure of the impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses or, alternatively, a specific allocation will be established. Additionally, loans that are considered impaired are specifically excluded from the quarterly migration analysis when determining the amount of the allowance for loan losses required for the period.

The allowance for collateral-dependent loans is determined by calculating the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as non-performing. We continue to monitor the collateral coverage, using recent appraisals, on these loans on a quarterly basis and adjust the allowance accordingly.

 

The following table provides information on impaired loans, disaggregated by loan class, as of the dates indicated:

 

     Recorded
Investment
     Unpaid Principal
Balance
     With No
Related
Allowance
Recorded
     With an
Allowance
Recorded
     Related
Allowance
     Average
Recorded
Investment
     Interest Income
Recognized
 
     (In thousands)  

March 31, 2014

                    

Real estate loans:

                    

Commercial property

                    

Retail

   $ 7,278       $ 7,398       $ 4,620       $ 2,658       $ 396       $ 7,304       $ 71   

Hotel/Motel

     3,510         4,136         2,992         518         59         3,531         49   

Gas station

     9,421         9,960         8,801         620         218         9,455         188   

Other

     11,544         12,893         8,314         3,230         355         11,624         223   

Residential property

     2,540         2,648         2,540         —           —           2,552         27   

Commercial and industrial loans:

                    

Commercial term

     12,658         13,136         2,642         10,016         3,917         12,819         177   

Commercial lines of credit

     733         815         733         —           —           745         14   

International loans

     1,113         1,113         522         591         57         1,130         —     

Consumer loans

     1,553         1,670         637         916         117         1,558         15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total gross loans

   $ 50,350       $ 53,769       $ 31,801       $ 18,549       $ 5,119       $ 50,718       $ 764   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                    

Real estate loans:

                    

Commercial property

                    

Retail

   $ 6,244       $ 6,332       $ 3,767       $ 2,477       $ 305       $ 4,342       $ 166   

Hotel/Motel

     6,200         6,940         4,668         1,532         1,183         5,125         530   

Gas station

     9,389         9,884         8,592         797         209         8,939         756   

Other

     11,451         12,882         9,555         1,896         351         10,014         1,047   

Residential property

     2,678         2,773         2,678         —           —           2,941         117   

Commercial and industrial loans:

                    

Commercial term

     13,834         14,308         2,929         10,905         3,806         13,083         968   

Commercial lines of credit

     614         686         173         441         252         1,008         54   

International loans

     1,087         1,087         286         801         78         1,284         —     

Consumer loans

     1,569         1,671         644         925         284         1,612         71   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total gross loans

   $ 53,066       $ 56,563       $ 33,292       $ 19,774       $ 6,468       $ 48,348       $ 3,709   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following is a summary of interest foregone on impaired loans for the periods indicated:

 

     Three Months Ended  
     March 31,
2014
    March 31,
2013
 
     (In thousands)  

Interest income that would have been recognized had impaired loans performed in accordance with their original terms

   $ 1,213      $ 1,068   

Less: Interest income recognized on impaired loans

     (764     (896
  

 

 

   

 

 

 

Interest foregone on impaired loans

   $ 449      $ 172   
  

 

 

   

 

 

 

There were no commitments to lend additional funds to borrowers whose loans are included above.

Non-Accrual Loans

Loans are placed on non-accrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless management believes the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on non-accrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Non-accrual loans may be restored to accrual status when principal and interest payments become current and full repayment is expected.

 

The following table details non-accrual loans, disaggregated by loan class, as of the dates indicated:

 

     March 31,
2014
     December 31,
2013
 
     (In thousands)  

Real estate loans:

  

Commercial property

     

Retail

   $ 3,507       $ 2,946   

Hotel/Motel

     2,510         5,200   

Gas station

     2,560         2,492   

Other

     5,008         4,808   

Residential property

     1,180         1,365   

Commercial and industrial loans:

     

Commercial term

     8,092         7,146   

Commercial lines of credit

     546         423   

Consumer loans

     1,631         1,497   
  

 

 

    

 

 

 

Total non-accrual loans

   $ 25,034       $ 25,877   
  

 

 

    

 

 

 

The following table details non-performing assets as of the dates indicated:

 

     March 31,
2014
     December 31,
2013
 
     (In thousands)  

Non-accrual loans

   $ 25,034       $ 25,877   

Loans 90 days or more past due and still accruing

     —           —     
  

 

 

    

 

 

 

Total non-performing loans

     25,034         25,877   

Other real estate owned

     —           756   
  

 

 

    

 

 

 

Total non-performing assets

   $ 25,034       $ 26,633   
  

 

 

    

 

 

 

Loans on non-accrual status, excluding loans held for sale, totaled $25.0 million as of March 31, 2014, compared to $25.9 million as of December 31, 2013, representing a 3.3 percent decrease. Delinquent loans (defined as 30 days or more past due), excluding loans held for sale, were $18.8 million as of March 31, 2014, compared to $16.3 million as of December 31, 2013, representing a 15.3 percent increase.

As of March 31, 2014, there was no other real estate owned (“OREO”). As of December 31, 2013, there were three OREOs located in Washington and California with a combined carrying value of $756,000 and a valuation adjustment of $56,000.

Troubled Debt Restructuring

In April 2011, the FASB issued ASU 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring,” which clarifies the guidance for evaluating whether a restructuring constitutes a TDR. This guidance is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For the purposes of measuring impairment of loans that are newly considered impaired, the guidance should be applied prospectively for the first interim or annual period beginning on or after June 15, 2011.

As a result of the amendments in ASU 2011-02, we reassessed all restructurings that occurred on or after the beginning of the annual period and identified certain receivables as TDRs. Upon identifying those receivables as TDRs, we considered them impaired and applied the impairment measurement guidance prospectively for those receivables newly identified as impaired.

 

The following table details troubled debt restructurings, disaggregated by concession type and by loan type, as of March 31, 2014 and December 31, 2013:

 

    Non-Accrual TDRs     Accrual TDRs  
    Deferral of
Principal
    Deferral of
Principal and
Interest
    Reduction of
Principal and
Interest
    Extension of
Maturity
    Total     Deferral of
Principal
    Deferral of
Principal and
Interest
    Reduction of
Principal and
Interest
    Extension of
Maturity
    Total  
    (In thousands)  

March 31, 2014

               

Real estate loans:

                   

Commercial property

                   

Retail

  $ —        $ —        $ —        $ 732      $ 732      $ 310      $ —        $ —        $ —        $ 310   

Hotel/Motel

    1,243        749        —          —          1,992        1,000        —          —          —          1,000   

Gas station

    1,256        —          716        —          1,972        364        —          —          —          364   

Other

    393        1,251        528        —          2,172        3,358        —          803        2,020        6,181   

Residential property

    782        —          —          —          782        —          —          —          —          —     

Commercial and industrial loans:

                   

Commercial term

    766        497        1,281        482        3,026        136        199        2,340        2,918        5,593   

Commercial lines of credit

    242        —          —          158        400        —          —          187        —          187   

Consumer loans

    —          —          149        —          149        —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 4,682      $ 2,497      $ 2,674      $ 1,372      $ 11,225      $ 5,168      $ 199      $ 3,330      $ 4,938      $ 13,635   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

                   

Real estate loans:

                   

Commercial property

                   

Retail

  $ —        $ —        $ —        $ 750      $ 750      $ —        $ —        $ —        $ 474      $ 474   

Hotel/Motel

    1,272        758        —          —          2,030        1,000        —          —          —          1,000   

Gas station

    1,291        —          729        —          2,020        365        —          —          2,609        2,974   

Other

    403        1,279        555        —          2,237        2,956        —          1,253        2,027        6,236   

Residential property

    795        —          —          —          795        —          —          —          —          —     

Commercial and industrial loans:

                   

Commercial term

    25        206        1,449        851        2,531        1,203        —          2,286        3,817        7,306   

Commercial lines of credit

    —          —          —          173        173        —          —          191        —          191   

International loans

    —          —          —          —          —          —          —          1,087        —          1,087   

Consumer loans

    —          —          —          —          —          —          —          149        —          149   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,786      $ 2,243      $ 2,733      $ 1,774      $ 10,536      $ 5,524      $ —        $ 4,966      $ 8,927      $ 19,417   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of March 31, 2014 and December 31, 2013, total TDRs, excluding loans held for sale, were $24.9 million and $30.0 million, respectively. A debt restructuring is considered a TDR if we grant a concession that we would not have otherwise considered to the borrower, for economic or legal reasons related to the borrower’s financial difficulties. Loans are considered to be TDRs if they were restructured through payment structure modifications such as reducing the amount of principal and interest due monthly and/or allowing for interest only monthly payments for six months or less. All TDRs are impaired and are individually evaluated for specific impairment using one of these three criteria: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent.

At March 31, 2014 and December 31, 2013, TDRs, excluding loans held for sale, were subjected to specific impairment analysis, and $2.7 million and $2.8 million, respectively, of reserves relating to these loans were included in the allowance for loan losses.

The following table details troubled debt restructurings, disaggregated by loan class, for the three months ended March 31, 2014 and 2013:

 

     March 31, 2014      March 31, 2013  
     Number of
Loans
     Pre-
Modification
Outstanding
Recorded
Investment
     Post-
Modification
Outstanding
Recorded
Investment
     Number of
Loans
     Pre-
Modification
Outstanding
Recorded
Investment
     Post-
Modification
Outstanding
Recorded
Investment
 
     (In thousands, except number of loans)  

Real estate loans:

                 

Commercial property

                 

Other (1)

     1       $ 943       $ 943         —         $ —         $ —     

Commercial and industrial loans:

                 

Commercial term (2)

     5         829         788         2         205         205   

Commercial lines of credit (3)

     1         250         242         —           —           —     

International loans (4)

     —           —           —           2         1,584         1,430   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7       $ 2,022       $ 1,973         4       $ 1,789       $ 1,635   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Includes a modification of $943,000 through a payment deferral for the three months ended March 31, 2014.
(2)  Includes modifications of $491,000 through a payment deferral, $107,000 through reductions of principal or accrued interest and $190,000 through an extension of maturity for the three months ended March 31, 2014, and modifications of $7,000 through a payment deferral and $198,000 through an extension of maturity for the three months ended March 31, 2013.

 

(3)  Includes a modification of $242,000 through a payment deferral for the three months ended March 31, 2014.
(4)  Includes modifications of $1.4 million through reductions of principal or accrued interest for the three months ended March 31, 2013.

During the three months ended March 31, 2014, we restructured monthly payments on seven loans, with a net carrying value of $2.0 million as of March 31, 2014, through temporary payment structure modifications or re-amortization. For the restructured loans on accrual status, we determined that, based on the financial capabilities of the borrowers at the time of the loan restructuring and the borrowers’ past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms are probable.

The following table details troubled debt restructurings that defaulted subsequent to the modifications occurring within the previous twelve months, disaggregated by loan class, for the three months ended March 31, 2014 and 2013, respectively:

 

     Three Months Ended  
     March 31, 2014      March 31, 2013  
     Number of
Loans
     Recorded
Investment
     Number of
Loans
     Recorded
Investment
 
     (In thousands, except number of loans)  

Real estate loans:

           

Commercial property

           

Retail

     1       $ 310         —         $ —     

Hotel/Motel

     1         1,000         —           —     

Gas station

     1         87         1         1,306   

Other

     2         481         —           —     

Commercial and industrial loans:

           

Commercial term

     1         53         8         762   

Commercial lines of credit

     —           —           1         188   

Consumer Loans

     1         149         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7       $ 2,080         10       $ 2,256   
  

 

 

    

 

 

    

 

 

    

 

 

 

Servicing Assets

The changes in servicing assets for the three months ended March 31, 2014 and 2013 were as follows:

 

     Three Months Ended March 31,  
     2014     2013  
     (In thousands)  

Balance at beginning of period

   $ 6,833      $ 5,542   

Additions

     200        791   

Amortization

     (474     (329
  

 

 

   

 

 

 

Balance at end of period

   $ 6,559      $ 6,004   
  

 

 

   

 

 

 

At March 31, 2014 and 2013, we serviced loans sold to unaffiliated parties in the amounts of $340.5 million and $316.2 million, respectively. These represented loans that have been sold for which the Bank continues to provide servicing. These loans are maintained off balance sheet and are not included in the loans receivable balance. All of the loans being serviced were SBA loans.